CLOUD COMPUTING
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Cybercrime is booming business. According to Symantec's newest Cybercrime Report, the money involved worldwide with digital attacks is now almost as lucrative as the illegal drug trade - $388 billion last year. In the U.S. alone, the total cost of cybercrime was $139.6 billion last year. Applying the same percentages as calculated in the worldwide survey, that means that 30%, or $42 Billion, was lost due to the actual attack and another 70%, or $98 Billion, was spent on recovery. That's 98,000,000,000 spent in time and money trying to recover from cyberattacks.
The most common types of cybercrimes are viruses and Trojans that malicious programmers use to steal information or force a user's computer to join a botnet. (A botnet is a network of private computers infected with malicious software and controlled as a group without the owners' knowledge, for malicious purposes, e.g., to send spam.) Viruses or malware have at one time affected 56% of online adults. The second most common cybercrime is credit card fraud (18%) followed by phishing schemes (14%).
Here's a frightening thought. While 74 percent of respondents said they were always aware of cybercrime, many do not take the necessary precautions to protect themselves. Forty-one percent of adult Americans indicated they do not have up to date security software to protect their information online. Among those who access the Internet via their mobile phone, only 16 percent install up to date mobile security.
Here's a real life example: a small Dallas area café got a "real deal" on the purchase of a used computer system for the business. Both software and hardware were included. Although it was an older system, the owner was quite happy to have it. However, he never considered computer security because he thought the "credit card companies and banks take care of all that." Now, he has learned that his system his been violated. It could have been someone just sitting in the parking lot with a smart phone. (There's an App for that!) Everything stored on the computer, employee data, vendor data and customer data (and definitely some customer data) has been compromised. This owner had no security system and no firewall. And soon, he may have no business either. The additional cost of a firewall and computer security software is minimal but so many business owners choose to "save money" on that only to wind up paying excessive legal fees or computer data restoration fees.
If you'd like to read more about this serious and costly type of crime and it's prevention, the Better Business in partnership with VISA, Symantec and KROLL has written an excellent article titled "Data Security Made Simpler." This is geared more toward the requirements of all businesses that accept credit cards as payment but can be a real eye-opener for anyone in business.
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TOP 10 MISTAKES OF ESTABLISHED RETAILERS (Part 4-Final)
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You may wish to change the order of this list; but all of these are mistakes made by competent store owners and managers. Here is my list of top ten mistakes.
10. |
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Excuse management |
9. |
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The Lone Ranger (Trying To Be The Lone Ranger) |
8. |
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No plan (Not Having A Plan) |
7. |
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Neglecting disaster recovery |
6. |
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The Way It's Always Been Done (Always Doing Things “The Way It's Always Been Done" |
5. |
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Use of social media (Not Using Social Media) |
4. |
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Ineffective or no web site |
3. |
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Buying Cheapest (Trying to Always Buy the "Cheapest" |
2. |
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Purchasing merchandise based on "gut" feel |
1. |
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Hiring a criminal |
Last month we touched on social media, web sites and buying cheapest. This month we will look at "buying by gut feel" and hiring criminals.
2. Purchasing merchandise based on "gut" feel.
So often we hear of buyers or owners who purchased the most beautiful _______, only to hear later that those lovely items are not selling. The buyer is stumped. Why? This may happen from time to time, but if it happens with any regularity, it is a sign of buying without regard to the customers. Remember the original goal: sell goods at a profit. The idea is to have merchandise that you have no emotional investment in but your customers can and do. Buy to please your customers and remember your customers' mind set is ever changing. If you notice that the sale of dresses is declining, look at what is increasing. If dress sales decrease and separates increase, buy more separates and fewer dresses. It's just common sense. This means you must be tracking your sales by classification (customer demand center or what the customer says they are shopping for when they come into your store).
No one knows your customers better than you do, so buy according to their likes and wants, not yours . . . even if you pass on a great buy at market. When you order merchandise for the next season, be sure to save some money for in-season buys of those hot commodities. That means you must use your Open-to-Buy. Make purchases according to plan.
Plan your sales first, then produce and study your Open-to-Buy, then place orders. Be willing to adjust orders as the year progresses. Select vendors who accept tweaks in your orders to increase purchase orders for hot selling items and decrease or eliminate orders for items that are not moving. Be prepared to find new vendors. Have a plan and follow it.
Remember, sales fueled by high markdowns are destroying your profit. A good Open-to-Buy will account for planned markdowns and will also allow you to easily adjust for in-season sales changes. You have to accomplish 2 things: one is to know your customer, their likes and dislikes and two is to follow your plan. Just as you should not do any grocery shopping when you are hungry or without a list, do not attempt to shop for your store without a plan and stop using your emotions as a guide.
Sometimes, you just make a mistake. It happens. Do not compound your error by storing this merchandise until the next season. Storage costs may seem trivial, but are much higher than you think. We have seen several studies that have shown that excess inventory costs 30-35% of its cost. That is expensive. Also, inventory takes up space at your store or requires a special facility, it never looks as fresh the second time you bring it to the sales floor, it loses its ability to generate excitement, and your regular customers always know it's a "repeat performance." This cheapens the entire store in the eyes of the most important people-your customers. Get rid of mistakes as quickly and efficiently as possible. Use your peer groups to discuss the best ways to dispose of these mistakes if you still need ideas. Then do NOT repeat the mistake! Most often, these purchases are made in addition to planned inventory purchases based purely on the emotions of the buyer. Have an Open-to-Buy, understand it and use it.
1. Hiring a criminal.
While no one intentionally hires someone who will steal from them, employee dishonesty has the potential to be the most costly loss category facing a company. Police tell us that given the proper motivation, 90% of people will steal. Some will take cash or merchandise, while others take time and services. Still others will take your piece of mind or your good reputation.
Employee dishonesty is one of the most under-reported crimes against businesses. Why? Owners and managers are so devastated, disappointed, and embarrassed to be victims of this crime, that often they will simply terminate the offender and "sweep the incident under the rug." However, no other single act or policy will do more to perpetuate a climate conducive to employee dishonesty than sweeping it under the rug. Let all employees know that if they are caught stealing, they will be prosecuted - - and then DO IT!
Criminal background checks are legally required for some jobs; but for most jobs, it is seen as only an extra cost of hiring a new employee. However, it may save a lot of time and money later. Negligent employment cases make criminal backgrounds seem more important. According to K.C. Bettencourt, an undercover investigator, one in three employees steal and it's rising 5% a year. Bettencourt's studies also showed that 20-25% of the work force will cheat when the stakes are high and supervision is low either by stealing merchandise, cash, supplies or time. Furthermore, about 10% will cheat no matter what. Are you still positive you don't have any thieves or potential thieves working for you? The Wall Street Journal reported that up to 75% of all employees have stolen at least once. On the average, 43% of retail workers admitted they have stolen from their employer.
Some authorities recommend integrity testing and criminal background checks. They explain that the benefit outweighs the cost. As that is a personal choice, here are a few facts:
* Most resumes (33%) contain flattering overstatements of accomplishments or employment positions held.
* The replacement cost of a bad hire is up to 3 times the salary of the job in question.
* Employers lost 60% of negligent hiring/supervision jury trials.
* Police recommend that criminal history checks be repeated every 3 - 5 years in case an employee's circumstances have substantially changed.
Do not ignore the facts in front of you. If your shrink is higher than average, you have a problem. If your cash is consistently short or over, you have a problem. If an employee is secretive about what they are doing at work, you have a problem. Here's an interesting statistic to close with: 44% of employees say their employers could do more to reduce employee theft and their employer chooses not to. You don't have to do something major to check up. Just occasionally do it for yourself. Close the store for the evening help a few times a year. Occasionally open for the manager who normally opens. Check out the discrepancies in the paperwork. You are the owner. It is your store and your future.
If you'd like more information on the open-to-buy, employee theft or strong internal controls, please visit our web site.
SUMMARY
This is the end of our four-part series of the top ten mistakes of established retailers. If you would like more information or help in any of these areas, on some other, please contact us today. We are here to help.
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4-5-4 RETAIL ACCOUNTING CALENDARS ARE READY
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We now have copies of the 2012 4-5-4 Retail Accounting Calendar available. The calendars are printed on cardstock and have 2012 on one side and 2011, 2012 and 2013 side by side on the back. To request a copy, or several, for your store just email us with your request being sure to include your name, store name and mailing address or if you would prefer, we can email the calendar in pdf format for you to print as you choose. Readers outside the United States will receive the calendar via email in pdf format.
If you are not familiar with the 4-5-4 calendars and are not sure how it could help you, please read The Retailers Calendar.
